Well-drafted contracts are a key component of running a successful business. They define transactional rights and responsibilities and protect against all kinds of risks. Here are four contracts most businesses can't do without and one that many business owners think they want but probably shouldn't use.
Noncompetes are sometimes unenforceable as a matter of public policy.
| CONTRACT TYPE | WHAT IT DOES |
|---|---|
| Nondisclosure Agreements | Your business probably has valuable proprietary information that you don't want shared publicly. It could be a secret recipe, computer code, the specifications for a new invention, or even something simple like a customer list or pricing model. A simple nondisclosure agreement keeps "need to know" information from being made public. |
| IP Assignments | If owners, employees, or contractors are creating intellectual property for your business (e.g., logos, copy, computer code, etc.), they should assign the IP to your company so it becomes an asset that increases the value of the venture. |
| Promissory Notes | The easiest way to codify a loan to the business is through a promissory note. Short, sweet, and legally enforceable. |
| Website Terms of Service | You can accomplish a lot with well-drafted TOS: Make collecting from nonpaying customers easier, require all disputes to be resolved in the closest courthouse, disclaim warranties, protect your company from liability if there's a hack or a security breach, and much more. |
| Noncompetition Agreements | Noncompetes are sometimes unenforceable as a matter of public policy. Even where permitted judges are often hesitant to deprive someone of her livelihood so your company can make a buck. You can achieve the goals of a noncompete - keeping former employees and contractors from personally profiting from your venture's IP, connections, and relationships - with solid intellectual property assignments and nondisclosure agreements. |